03 Dec 2012 – “ Out Of Touch ” (Hall & Oates, 1984)
Fiscal Cliff Discussion Risk Event still very
much alive. Spain maths on budget. Italian maths, French… Bah… Still feels like
things are a bit out of touch with reality here (equities vs. bonds). And that
Greek buy-back looks really, really
generous. Outwordly. Then again, best way to get rid of private
ownership. After the OMT, the OPM… Obviously, other people’s money. PMI paint a
slightly less bleak picture, but on rock bottom levels.
"Out Of Touch" (Bunds 1,41% +3; Spain
5,24% -6; Stoxx 2580 unch; EUR 1,306 +50)
---
Fiscal
Ping-Pong, Part IV on Friday evening, but eventually everyone remained cool and
US indices closed about flat with a last hour +0.5% spike and then a -0.25%
correction into the close on index rebalancing. Fiscal Cliff Discussion Risk
Event (FCDRE) live over the weekend with both parties trading blows and menaces.
Merkel quite realistic that some kind of haircut on Greece will
materialize at some stage in time. Obviously, the can-kicking exercise will end
up with the totality of the Greek debt held by the official sector and the idea
seems to be to bury or postpone any reckoning to whenever it suits all parties
(like not before elections, for instance).
ESM
& EFSF rating taken down to Aa1 by Moody’s, after the latest move on
France, but this is hardly a surprise.
The
question of an equally lenient treatment of Ireland
and Portugal, in line with
the latest conditions reached on supporting Greece, remains open at this stage.
Asian
close pretty even, but for China… in red. Talk
about a change, here… Charts look terrible.
Not
much around at open.
Opening
levels close to home: Equities about unchanged to a tick firmer (matching the
slightly better US close), but with EGBs better bid. Bunds 1.36% (-2) / UST
1.61%. Periphery unchanged with Spain
at 5.30% in 10s. Credit a tick better, too.
EUR
over the 30-handle at 1.303 with Commodities up half a point.
Odd.
Everything is shining. Rise and Shine!
Chewing
on the Greekbuy-back proposal,
which ended up being an exchange into EFSF 6m bills (up to EUR 10bn, 2023 price
range 38.1-40.1% of par, 15.095% - 14.389% in yield, value 17 Dec, 2042
30.2-32.2% in price, 11.951% - 11.372 in
yield). Ok. No cash, but well over Friday’s closing levels of 16%, respectively
12.5% in yield (bid). Leading to an instant jump in Greek bonds.
Final
Manufacturing PMIs for November with the EZ confirming flash estimates of 46.2
(after 45.4 in Oct). Output
revised higher to 46.1 (after 44.8 flash and 45 in
Oct) and New Exports at 46.4 (after 45.9 flash and 45.3 prior). German numbers
confirming flash estimates of 46.8 from 46, but France
slipping to 44.5 (flash 44.7 after 43.7), as for Italy at 45.1 (after 45.5). Spain
doing better at 45.3 after 43.5
Bills-only
day: Germany with EUR 3bn 6m at -0.0168% (after -0.012%), Dutch combined about
EUR 2.4bn of 3 and 6m at -0.34% and -0.016% (after -0.029% and -0.02%), France
with short of EUR 6.8bn in 3m at -0.022%, 6m at -0.008% and 12m at +0.016
(after last week-0.020%, -0.008%, +0.019%).
Belgian
and EFSF bills tomorrow.
Not
a huge week in terms of govie supply: The Spanish auction (exceptionally on
Wed) will be for up to EUR 4.5bn in 2015, 2019 and 2022s. On Wed as well EUR
4bn Schätze out of Germany. Thursday will see a rather modest EUR 4bn French auction
for 2018, 2019 and 2027 OATs.
Good
Risk On developing in the course of the late morning and during lunchtime.
Equities
up a good 0.75%. Credit snapping tighter by 3% (-4- ticks). Hard Core EGBs
slammed, Soft Core soft, Periphery on the Ramp and revisiting Thursday’s late
morning tightest levels in 10 YRS (before snap-back) at 4.45% and 5.15%
Bunds
1,42% (+4), OBLs at 0,44% (+4) and BKOs 0,025% (+1,7). UST at 1,64% (+3) COB.
Spanish
2s at 2,79% (-4), 10s at 5,17% (-13). 2-10 YRS spread 237bp (-10).
Italian
2s at 1,77% (-3), 10s at 4,39% (-10). 2-10 YRS spread 263bp (-6).
Greek
bonds going through the roof to hit the buy-back / exchange levels (Obviously
other people’s money… These bonds closed – on a price basis – about 34.3% and
25.7% on Friday 23 Nov and about 35.60% and 28.50% last Friday. Rather the bid
side (then), so put the offer 1 point higher, but these prices really seem
generous. And somehow 5% above the levels 10 days ago. EUR 5bn difference. No
small change…. Obviously, other people’s money… After the OMT, the OPM…
Final US PMI at 52.8 (from 52.4). ISM
figures were a miss at 49.5 for Manufacturing and 52.5 for Prices Paid (fcst
51.4 after 51.7 and 53.3 after 55). Put the blame on Sandy. Construction
Spending, on the other hand, rose 1.4% in Oct (fcst +0.5% after rev. +0.6%),
confirming the latest batch of healthy housing figures.
US cash open rather less eventful.
Initially firmer, but holding near / just above Friday’s levels. FCDRE…
Putting a bit of a dampener on European risk
appetite, too.
Europe running out of steam with the US
flashing red. But, but, but… It felt so good this morning, still.
Bah.. Equities closing barely changed, but
some damage done to EGBs, still reeling from any further attempt to get debt mutualisation
through the back-door. Credit still squeezing, 2.5-3% tighter.
Bunds closed at 1,41% (+3), OBLs at 0,43%
(+3) and BKOs 0,022% (+1,5). UST at 1,63% (+2) COB.
Periphery doing well, but, as for the rest
of Risk, off late morning tightest levels.
Greek bonds went on the ramp, closing at
39% (14.75% yield) for the 2023s and 30.75% (11.77%) for 2042s, down 125bp,
respectively 75bp from last Friday.
Spanish 2s at 2,80% (-3), 10s at 5,24%
(-6). 2-10 YRS spread 244bp (-3). Italian 2s at 1,77% (-3), 10s at 4,44% (-5).
2-10 YRS spread 267bp (-2).
EUR 1.306, healthy. Commodities about
unchanged to a little tick better.
Take-away: Fiscal Cliff Discussion Risk
Event still very much alive. Spain maths on budget. Italian maths, French… Bah…
Still feels like things are a bit out of touch with reality here (equities vs.
bonds). And that Greek buy-back looks really, really generous. Outwordly. Then again, best way to
get rid of private ownership. After the OMT, the OPM… Obviously, other people’s
money. PMI paint a slightly less bleak picture, but on rock bottom levels.
Outlook: More of the same. Fiscal Cliff
Discussion Risk Event still live. Spain maths on budget. Italian maths, French…
Bah… Things are a bit out of touch with reality, here (equities vs. bonds).
Spanish unemployment tomorrow. Service PMIs on Wed.
European 50 & 100d averages: EStoxx
2509/2463, DAX 7270/7115, CAC 3448/3422, MIB 15548/15140, IBEX 7821/7522.
US 50, 100 & 200d averages: INDU
13199/13137/12995, S&P 1422/1409/1385, NASDAQ 3024/3019/2987 with AAPL at
613/625/600.
EUR: 50d 1.291, 100d 1.271 & 200d
1.279. Fibo retracement (of May 2011 1.494 & Jul 2012 1.204 down-leg) at
1.273& 1.315, then 1.349 (50%).Jul 2012 to Sep rebound levels: 1.231 –
1.247 – 1.261 – 1.274 – 1.291 -1.317 .
New Issues starting the week mainly with
EUR 1.25bn 5 YRS Pfandbrieve (Belgian covered bonds) for KBC at MS +30
(compared to Belfius’ inaugural deal 2 weeks ago at MS +45, now trading about
MS +30). Some taps with Unicredit increasing a 10 YRS LT2 by EUR 250m at MS
+498 and French unemployment agency UNEDIC adding EUR 300m to its April 207 benchmark
at OAT +17 (about MS +5).
Closing
levels:
10 YRS Yields: Germany 1,41% (+3);
Luxembourg 1,51% (+2); Netherlands 1,63% (+2); Finland 1,65% (+3); Swaps 1,70%
(+3); EU 1,72% (+2), Austria 1,76% (+2); EIB 1,88% (+2); EFSF 2,01% (+2);
France 2,05% (+1); Belgium 2,16% (+0); Italy 4,44% (-5); Spain 5,24% (-6).
10 YRS Spreads: Luxembourg 10bp (-1);
Netherlands 22bp (-1); Finland 24bp (unch); Swaps 29bp (unch); EU 31bp (-1);
Austria 35bp (-1); EIB 47bp (-1); EFSF 60bp (-1); France 64bp (-2); Belgium
75bp (-3); Italy 303bp (-8); Spain 383bp (-9).
EUR swap curve 2-5 YRS 46bp (+1,0); 5-10
YRS 81bp (unch) 10-30 YRS 63bp (unch).
2 YRS German BKOs closed 0,022% (+1,5) and
5 YRS OBLs 0,43% (+3).
Main -3 to 120 (-2,4% tighter); Financials
-5 to 155 (-3,1% tighter); Cross -11 to 486 (-2,2% tighter).
Stoxx Futures at 2580 / +0,0% (from 2580)
with S&P minis at 1414 (+0,1% from 1412, at European close).
VIX index at 16,3 after 15,8 yesterday same
time.
Oil 89,1/111,0 (WTI/Brent) from 88,5/110,9
(+0,7%/+0,1%). Gold at 1715 after 1712 (+0,2%). Copper at 363 from 361 (+0,6%).
CRB at EU COB 299,0 from 299,0 (+0,0%).
BDIY, down 9 to 1077.
EUR 1,306 from 1,301
Greek guesstimate:
Bouh! Greek bonds went on the ramp,
closing at 39% (14.75% yield) for the 2023s and 30.75% (11.77%) for 2042s, down
125bp, respectively 75bp from last Friday. Thanks
for the wrapping, guys!
All levels COB 17:30 CET
Fast-forward
Macro and Events:
Hmm… Only bits and pieces on the macro
front. Service PMIs on Wednesday Industrial output in Spain on Wed. Factory
Orders in Germany on Thu. Fri NFP in the US.
Thursday ECB& BOE (FED on 12 Dec)
The start of next week remains full of bills
(Belgium, EFSF on Tue) and see additional EUR 4bn German 2 YRS on Wednesday.
Spain will hold an auction of up to EUR 4.5bn in 3, 7 and (short) 10 YRS on
Wednesday as well (as Thursday will be closed), while France will supply its
monthly OAT auction on Thursday, albeit for only up to EUR 4bn and without 10
YRS (2018, 2019 & 2027).
EC:
Tue PPI fcst +2.5% after +2.7% YoY; Wed Final Comp PMI, Retail Sales; Thu EZ
GDP and ECB
GE: Wed Final Serv PMI; Thu Factory Orders
last -3.3 MoM, Friday Industrial Production last -1.8% MoM/-1.2% YoY
FR: Wed Final Serv PMI; Thu Q3 unemployment
Italy: Wed Final Serv PMI
Spain: Tue Unemployment; Wed Industrial
Output (last 7% wda).
US: Mon Final PMI, MfG ISM &
Construction Spending; Tue ISM NY; Wed Factory Orders, Productivity and Labour
Costs; Thu Claims; Fri NFP
Click
link under title or below for today’s musical support:
Manic
moves and drowsy dreams/ Or living in the middle between the two extremes
No comments:
Post a Comment